New York Appellate Division Upholds Reinstatement of ACA Financial Suit Against Goldman Sachs

August 18, 2015

Kasowitz secured another victory today on behalf of ACA Financial Guaranty Corp., a New York-based bond insurer, in its $120 million fraud suit accusing Goldman Sachs Group Inc. of deceiving ACA into believing hedge fund Paulson & Co. was a long investor in the collateralized debt obligation known as ABACUS, when both the bank and the hedge fund knew that Paulson was betting ABACUS would fail. New York’s Appellate Division unanimously confirmed that Goldman Sachs’s alleged misrepresentations to ACA were material, because ACA “would not have provided the financial guaranty had it known the truth,” and were intended to defraud ACA, because, among other things, Goldman Sachs had “a long-term and economically rational interest in pleasing [Paulson] with whom it had already done billions of dollars in transactions.”

The decision comes in the wake of an April decision by the Court of Appeals holding that ACA properly alleged that it reasonably relied on Goldman Sachs’s misrepresentations. The case is now remanded to the trial court.